Defined benefit (DB) pension scheme funding levels remain "strong" despite equity market shocks seen in April, with the Pension Protection Fund’s (PPF) 7800 Index revealing that the aggregate surplus of DB schemes fell £13bn to £202.5bn as at the end of April 2025.

The update showed that total DB scheme assets increased by 0.2 per cent over the past month, rising from £1,087.2bn in March to £1,089.5bn in April.

However, this was more than offset by a 1.8 per cent increase in liabilities, which rose from £871.7bn to £887bn at the end of April.

The deficit of schemes in deficit also increased by £3.3bn, rising from £29.8bn at the end of March to £33.1bn at the end of April.

PPF chief actuary, Shalin Bhagwan, explained that much of the movement in funding levels over the past month was driven by recent economic turmoil, noting that "market volatility ratcheted up during April thanks to a string of announcements from the US regarding tariffs and broader trade policy".

“This increased uncertainty drove a flight-to-safety in global markets with bonds performing better than risky assets like equities," he continued.

"In the UK, ten-year fixed-interest yields were down by some 24 basis points across the month, while fifteen-year fixed-interest yields fell by 15 basis points.

“This contributed to an increase in liabilities and meant that the aggregate surplus fell for a third month in a row – down an estimated £13.0bn, from £215.5bn to £202.5bn. Meanwhile, the funding ratio fell by 1.9 percentage points to 122.8 per cent.”

LCP's Pension Explorer showed a similar trend, as it revealed that the combined IAS19 funding level for the UK pension schemes of FTSE100 companies remains high at around 118 per cent as at 30 April 2025, corresponding to a surplus of over £50bn.

Whilst LCP agreed that equity markets experienced notable volatility over April due to uncertainty around international trade, it suggested that, following years of de-risking, assets are now largely invested in low-risk liability-matching portfolios, with less than 8 per cent of total UK DB pension assets across the FTSE100 allocated to equities.

However, it clarified that although this approach has helped schemes mitigate downside risk and volatility to preserve funding levels, there is a balance to consider potential missed upside too, particularly if choosing to run the scheme on for a period of time.

Commenting on the findings, LCP consultant and part of the endgame innovation team, Aaron Chaderton, said: “It is a positive message that funding levels have continued to be strong despite the external economic climate.

"It demonstrates the importance of taking good, robust advice when looking at endgame strategy to understand the key risks and opportunities of all available options.”

Adding to this, LCP associate consultant and also part of the endgame innovation team, Harry Fitchet, said: “It’s good to see that even in volatile markets, schemes are maintaining healthy surpluses and therefore keeping their endgame options open.

"With the regulator now firmly focused on endgame strategy, the scene is set for the next round of endgame guidance due in summer as well as upcoming government announcements.”

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